Archive for the ‘Patent’ Category

Readers may recall that in our July newsletter we reported on the wonderland Supreme Court decision in Alice v. CLS Bank. The offspring of the mischief that decision created have now formed a deluge of cases during the past month and a half (for example, see the above article).

To briefly review, the Court has grafted onto statutory (Congress enacted) patent law the concepts that one cannot obtain a patent on a law of nature, a natural phenomenon, or an abstract idea. In particular, the Court has refused to define what it means by “abstract.” In fact, in Alice, the Court expressly refused to delimit the contours of what an abstract idea is. Like its previous case of In Re Bilski, which also concerned an “abstract” business method, the Court in Alice decided another well established business method was abstract. Further, the Court said that merely using a generic computer to implement the abstract method does not make the method patentable. One could conclude that well established business methods were abstract and the matter could end there.

However, the language in Alice can and has been read more generally to suggest that methods of organizing human interactions are mere ideas and therefore are abstract. Following this suggestion in Alice, the lower courts have been having a field day declaring that granted patents are invalid because they merely implement an abstract idea with a computer. So far approximately (at last count) 12 issued patents have been declared invalid during August and September. A few examples: 1) a method of guaranteeing a financial transaction over the internet; 2) a method of playing bingo repetitively with many numbers; 3) a method for exchanging identities between anonymous parties on the internet; 4) a method of up-selling over the internet (pointing out additional items a buyer may want); 5) a method of exchanging loyalty points accrued from one vendor with another vendor; 6) a computerized method for rounding-up credit and debit transactions to the nearest dollar and then using the money for special use; and finally, 7) a non-business method claim for a method to animate lip synchronization with sound and facial expressions of animated characters.

Where this will all end is up in the air. We will continue to pay close attention to the currents of the developing case law in order to best advise our clients. Needless to say, a lot of time, money, and effort expended by inventors to obtain their patents has been undercut by the Court without statutory basis or clear guidance. It may well be time for Congress to step in and try to clean up the mess.

As discussed above, the Alice v CLS Bank decision of the United States Supreme Court has the potential to preclude patent protection for many software and computer-implemented inventions and to invalidate many issued patents for those inventions.¬† The Court gave only the sketchiest guidance on how to determine when a claimed invention is too abstract.

The lower courts now are applying the Alice decision to computer-related inventions unrelated to old business methods.¬†¬† This month, the Central District of California decided Planet Blue v Activision, which involved patents related to automating the process of synchronizing movement of the lips of an animated character with a pre-recorded sound track.¬† The Planet Blue invention was new and solved a real technical problem in computer animation.

The trial court decided that the Planet Blue patent claims nonetheless did not address patentable subject matter under Alice because the claims of the patent were, effectively, too broad.¬† The court identified what was new about the invention as included in the claims; namely, using ‘rules, rather than artists,’ to set particular parameters for lip movement as the animated character transitioned from one sound to another.¬† Although there was considerable detail in the claims, that detail was old and the claims did not include specifics of the rules.¬† The court concluded that the claims stated an abstract idea and effectively said ‘apply it,’ which Alice determined was not patentable.

If the Planet Blue approach becomes the law of the land (it’s not yet), then software patents likely will become very narrow.¬† This area of the law is in rapid flux and we anticipate that the Planet Blue decision will be reviewed by the Federal Circuit Court of Appeals.

Patent infringement litigation usually is high stakes and very expensive.¬† The cost of the litigation can easily reach seven figures or more.¬† In the United States, each party to litigation generally bears its own costs, with exceptions.¬†¬† Section 285 of the patent statute¬†contains the exception for patent litigation.¬† The statute is short and sweet:

The court in exceptional cases may award reasonable attorney fees to the prevailing party.¬† (Emphasis supplied).

But what cases are ‘exceptional?’¬† In the past, the Federal Circuit Court of Appeals, which hears patent appeals, only allowed an award of attorneys fees if the claim or defense was ‘objectively baseless’ based on ‘clear and convincing evidence.’¬† This standard favored patent owners seeking to enforce patents and provided a bright-line, predictable result.

Earlier this year the Supreme Court in Icon Health & Fitness rejected the Federal Circuit bright-line standard, and, in keeping with the recent Supreme Court approach to patent cases, adopted a fuzzy-is-better standard:

¬†…an “exceptional” case is simply one that stands out from the others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances…

The Federal Circuit recently considered the Icon Health & Fitness case on remand from the Supreme Court and sent the case back to the lower court for decision on the attorneys fee issues.¬† The Federal Circuit reminded the lower court that the attorneys fee decision does not stop with a determination that a case is ‘exceptional.’¬† The lower court has discretion to deny attorneys fees even in exceptional cases.¬† The decision of the lower court judge will be reviewed on appeal only to determine whether the judge abused his or her discretion, which means the Federal Circuit will defer to the lower court judge in almost all cases.

The effect of the decisions is to transfer power from the Federal Circuit to the district court judges who hear the witnesses, see the evidence, and observe the litigation behavior of the parties.¬† The effects on the parties are to reduce the predictability of patent litigation, to increase the risk to every patent litigant, and generally to discourage patent litigation.

Last month the Supreme Court decided the case of Alice v. CLS Bank and wandered around once again in wonderland. Let me explain.¬† The U.S. Supreme Court, as judge made law, has grafted onto patent law the concepts that one cannot obtain a patent on a law of nature, a natural phenomenon, or an abstract idea. The problem from the perspective of a patent applicant is that the exclusions are relatively undefined. In particular, the definition, or lack thereof, for the term “abstract.”

Patent examiners routinely reject applications that seem to have a mathematical expression at their core, and during the past approximately 30 years attorneys at our firm have prosecuted sophisticated computer/software implemented inventions and have frequently had to overcome patent office rejections based upon the notion that software implemented inventions were “abstract.” Consequently, court decisions construing that term are of heightened interest to our clients.

There was hope that Alice would clarify the Court’s definition of abstract. Alice involved a computerized method for implementing the financial concept of an intermediate financial settlement. Without needing to go into the details of the financial concept, it is sufficient to note that the Court apparently takes a dim view of financial inventions. Alice was found to be no more than a fundamental economic practice and therefore “abstract” and unpatentable. Further, the Court concluded that the mere recitation of a computer cannot transform an abstract idea into a patent-eligible invention.

As for guidance, the Court said: “In any event, we need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.” Apparently, like pornography, the Court knows something is abstract when they see it. The rest of us are left to wander around looking for a way out of the rabbit hole.

The Supreme Court has had a busy time of it in June stirring the patent pot, with decisions in three cases and arguments in a fourth. The general rule is that whenever the Supreme Court decides a patent case, the law is left in worse shape than it was before. The recent decisions are no exception. This month, we’ll take a look at Limelight v Akamai, decided June 2, 2014.

In Limelight, the Court considered “inducement of infringement.” Inducement of infringement occurs when one person causes, or induces, another person to infringe a patent. Where the patent is to a method of doing something, the inducement rule for many years has been that (a) one person must induce another person to infringe the patent, and (b) the other person must actually perform all of the steps of the method and thus infringe the patent. The person who caused someone else to infringe is liable for infringement, just is the person who actually infringed.

This rule worked fine when things were made from steel and wood, but has been a problem for Internet-implemented inventions that can be performed over a computer network by different people in different locations and even different countries.

The stage is set for Limelight and Akamai.

MIT owned patents relating to storage and retrieval of content over the Internet. MIT licensed the patents to Akamai, which runs a service utilizing the MIT patent to store and retrieve content. The patent (and the Akamai service) involves storing large files on servers located in different locations, and, hopefully, near the user who wants access to the file. Local storage of the large files allowed faster access by the user. One of the steps of the patent is that Akamai ‘tags’ which of a customer’s files are to be stored in the local servers.

Limelight operates a competing service that is just like Akamai’s service, but with one important difference – Limelight does not ‘tag’ the files. Instead, Limelight’s customers tag their own files, using advice and assistance from Limelight. Because Limelight does not tag the files, no one person performs all of the steps of the patent and there is no one that Akamai can sue for direct infringement. Because no one person performs all of the steps of the patent, under the old rule Limelight cannot be liable for inducement of infringement. Akamai has no remedy. Seems unfair, doesn’t it?

The Federal Circuit Court of Appeals thought so. It decided that the old rule did not work in the information age and that Limelight’s actions in copying Akamai’s business but avoiding the patent should not be tolerated and that Limelight should be liable for inducement of infringement.

The Supreme Court reversed and reinstated the old rule, seeing no reason to change. As a result of the Supreme Court’s decision, Akamai is without remedy and Internet copyists are free to cut a step from a method patent, instruct someone else to perform the missing step, and avoid patent infringement altogether. The value of Internet inventions, or in fact any method patent that can be performed by different people, has just dropped.

Do your employees create new inventions, products or designs?¬† Have all of your employees assigned all company inventions to the company?¬† If not, then the company does not own the invention, even if the invention was created on company time and with company resources and in the course of the employee’s work for the company.

Peregrine developed new products and obtained patents for those products.¬† Peregrine sued RF Micro Devices for infringement of the patents.¬† During the course of the litigation, the parties learned that a former Peregrine employee should have been named as an inventor on the patents, but was not.¬† Peregrine usually obtained assignments of patent rights from all employees, but could find no such assignment from the former employee and the former employee had no recollection of signing such an assignment to Peregrine.¬† Instead, the former employee subsequently assigned his patent rights to RF Micro Devices, the accused infringer.

Peregrine now finds itself in the embarrassing position of co-owning the invention with RF Micro Devices,.

The case includes a discussion of the ‘hired to invent’ doctrine, in which a person is employed to solve a particular problem.¬† Under Federal common law; that is, law made by judges in their decisions, an invention created by a person hired to solve a particular problem is owned by the employer even if the inventor did not sign an assignment.¬† In the Peregrine situation, the former employee had performed several different functions for the company during the course of his employment and was not hired to solve a particular problem. He was not ‘hired to invent’ and Peregrine did not own his rights to the invention.

The result was that a preliminary injunction against RF Micro Devices was denied.

The bottom line?¬† Make absolutely sure that every employee has signed an agreement assigning patent rights to all company inventions to the company. The agreement can be in the employment agreement and can apply to inventions that the employee has not yet created.

A provisional patent application is a temporary application that provides patent-pending status for one year.¬† The provisional application can be a relatively low-cost way to preserve your patent rights while you develop your invention.¬† The protection offered by a provisional patent application is only as good as the information contained in the application and only addresses the invention as disclosed in the application.¬† The provisional application must include enough information in the specification (the narrative part of the application) and the drawings so that a person who is knowledgeable in the technical field of the invention can make and use the invention.

To have any continuing value, your provisional application must be followed within one year by a full U.S. non-provisional (utility) patent application.¬† If the invention is one for which you will seek international patent protection, your international patent application(s) also must be filed within one year of the provisional filing date.

If you develop improvements to your invention while your provisional application is pending, the improvements are not protected.¬†¬† What to do? File another provisional application addressed to the improvements.

Google Street View is the popular feature of Google Maps that allows you to see panoramic photographs of, well, pretty much anywhere with different orientations and magnifications.¬† The photographs are stitched together in software to allow the viewer to navigate through a virtual representation of the real world.¬† You may have seen the Google photography cars driving around with an array of cameras, taking pictures of your neighborhood.

If you look for Google Street View today, you will not find it.¬† Why?¬† We can’t say for sure, but it may have something to do with a decision by the Federal Circuit Court of Appeals in the case of Vederi v Google.

But we’re getting ahead of ourselves.¬† Back in the year 2000, Enrico Bernado and Luis Goncalves were Ph.D candidates at CalTech.¬† They attached cameras and a GPS device to Mr. Bernado’s car and drove around Pasadena taking photographs.They also developed software to stitch the photographs together, creating panoramic views and allowing a person to navigate through a virtual representation of the real landscape.¬† The results were available through the City of Pasadena’s website.

Drs. Bernado and Goncalves founded Vederi, LLC and were awarded four patents for their work.¬† Vederi sued Google for patent infringement for its Street View product.¬† The trial court found no infringement based its interpretation of the claims of the patents, but the Federal Circuit Court reversed and sent the case back to the trial court.¬† We suspect that Google believes that Street View infringes the patent claims as interpreted by the Federal Circuit and as a result took Street View off line.

Will we see Google Street View again?¬† Because a patent infringement lawsuit is a license negotiation by another name, we suspect so.

Last month, you promised that you’d continue your explanation of patents and copyrights with a rant about patents and trolls. So…? What, exactly, do you have against trolls, other than the fact that they live under bridges and threaten goats?

Signed,

Been Waiting a Month

Dear BWaM:

OK. So as not to disappoint, here goes!

The press has been overflowing for the past few years with breathless articles about evil “patent trolls”.¬† You see, back in the late 1990s semiconductor giant Intel was being sued for patent infringement by many patent owners. The company’s lawyer, Peter Detkin, called one of the lawyers representing the patent owners a “patent extortionist” in an article about the company, but others at Intel did not like that term. There was a contest, and Detkin, Anne Gundelfinger and Mark Davis somehow came up with “patent troll” as an alternative.

Remember the story of how the trolls hid under a bridge that they had not built, but demanded a toll from everyone who crossed?¬† Me neither. The original Norwegian folk tale is completely silent on who built the bridge, but it’s pretty clear that the goats had not done so, right? Goats lack opposable thumbs.¬† And as there is no other character in the story…but I digress. The troll term struck a chord, and came to mean a company that asserted patents on technology that they had not invented, seeking royalties. Such companies are clearly evil villains, because they don’t invent anything, and they sue other people using patents that they buy from inventors. Boo! Hiss! The media climbed on board, and there have been thousands of publications decrying the “rent seeking behavior” of the trolls. For a very entertaining overview, click here.

Fast forward to 2014, and you have bills in Congress and the President of these United States promising to do something to stop the trolls because they hurt innovation! But…do they really? Let’s think about this.

Suppose you passed a law that says that anyone who owns a piece of ground¬† and who built a building there could do only one of two things: occupy it himself, or occupy part of it, and rent the other part out. He can sell the building, but only to someone who will only occupy it – and never rent it out, because otherwise, the new owner would not be the one who built the building – he would only be seeking to collect rent.¬† He can’t move out and rent the entire building because then he would not be using what he had built, only seeking to collect rent. Oh, and the original owner would not be allowed to hire a manager by promising to pay a portion of the rent collected, and he can’t buy the building next door, since he didn’t build it. Forget real estate investment trusts that buy properties to build a portfolio – they don’t build things…they must be evil too.

So under this new law, what is a property worth? What incentive does the land-owner have to build his building if he has to live in it until he can sell it to someone who can only live in it? Easy – you’ve just reduced the value of almost every property in America by a huge amount. No one can be a real estate investor in the resale market. Period. So why would our country want to do the same thing to inventors, by limiting their ability to sell their patents? Because big companies that infringe patents are sick and tired of getting caught with their hands in the cookie jar, and can afford to create a fable and lots of press to convince us that their problem is actually our problem. Congress has taken their money that comes wrapped in that same fable, and the President knows a good story when he hears it.

It has been pointed out that it costs millions of dollars to defend against a patent infringement law suit, and that these suits take years to work their way through the courts. True. But the same is true of other high-stakes business litigation in many fields. It’s not only the “trolls” who suffer from our less than efficient court system: Apple and Samsung have been battling for many years, and there is no end in sight. Few call either of these companies patent trolls (some surely do), but that doesn’t stop anyone from complaining that these suits are harmful. It’s just strange that these same complainers seem to be perfectly happy to have and use the innovations that are supposed to be protected by patents, while never bothering to ask what the world would look like if nobody could raise capital by having effective patents in the first place. (For a great explanation, read William Rosen’s The Most Powerful Idea in the World)

As a registered patent attorney who has represented all kinds of inventors for more than thirty years (from garage inventors to the largest multinational corporations) and has been involved in patent licensing and sale for all of that time, the Doc can simply say that there is another, more honest definition of “patent troll” — one given by Professor R. Polk Wagner of the University of Pennsylvania School of Law, who said that a patent troll is simply anyone who would dare to sue ME for patent infringement.

So there you have it. The same old story: don’t believe everything you read on the Internet…World War I started that way.

To get the straight story on intellectual property issues, be sure to ask the attorneys at LW&H. For reasons that nobody can explain, they actually enjoy thinking about this stuff.

In his state of the union speech, President Obama said:¬† “And let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.”

Both houses of Congress are well on the way to enacting new patent legislation, in part as a¬† reaction to the bullying of small businesses by MPHJ Technologies through demand letters alleging patent infringement.

H.R. 3309, entitled ‘Innovation Act,’ was introduced in the Republican-controlled House of Representatives on October 23, 2013 and passed the House on December 5, 2013 with a majority vote of both parties.¬†¬† H.R. 3309 has now been referred to the Senate Judiciary Committee.¬† The stated purpose of H.R. 3309 is to curb abusive patent infringement litigation, particularly by ‘patent asserting entities’ that own patents but do not produce products.¬† H.R. 3309 includes several changes, but the one that is most eye-popping¬† is that the plaintiff must pay the defendant’s expenses including attorney’s fees if the court determines that infringement claims are not reasonably justified or are made in bad faith.

The cost-shifting provisions of H.R. 3309 are radical.¬† In the U.S., each party to litigation generally bears its own costs.¬† H.R. 3309 would adopt the standards of the Equal Access to Justice Act, 28 U.S.C.√ā¬ß2412(d)(1)(A), and apply those standards to private patent litigants.¬† The Equal Access to Justice Act applies to payment of costs and attorneys fees by the Federal government.¬†¬† In a civil suit by or against small businesses or individuals of limited means, the Federal government is liable for cost and attorneys fees UNLESS the government demonstrates that its position in the litigation was ‘substantially justified.’

H.R. 3309 would certainly avoid the defendant’s costs of patent infringement litigation, but it would also severely limit the value of inventions and patents.¬†¬† If H.R. 3309 becomes law, only the very brave, the very foolish, or the very rich will initiate patent infringement litigation.

S. 1720 was introduced on November 18, 2013 by Democratic Sen. Patrick Leahey, Chairman of the Senate Judiciary Committee.¬† S. 1720 includes some of the procedural improvements of H.R. 3309, but excludes the cost-shifting provisions.¬†¬† S.1720 takes direct aim at the practices of MPHJ Technologies by adding that the Federal Trade Commission will police false or misleading demand letters.¬† We expect that Sen. Leahey’s version of the bill is the one that will advance from Sen. Leahey’s committee.